Question

The accountant for Runner Holdings Ltd. has prepared the following table in order to explain to the company’s board of directors the transactions that caused various investment accounts to increase and decrease during the past year. The company uses the fair value through profit or loss model for all held for trading investments, the equity method for investments in associates, and the cost method for equity investments that are not traded actively and have no determinable fair value.

		Held for Trading Investments			Investments in Associates			Long-term Investments (at cost)
Balance, beginning of year		$54,100			$256,200			$28,500
Dividends earned and received		900			7,700			900
Interest earned and received		1,400			0			0
Realized gain (loss)		4,300			0			(2,200	)
Unrealized gain (loss)		(3,300	)		(8,000	)		2,000
Proceeds received on sale of investment		9,100			0			7,000
Share of income (loss)		(3,600	)		21,400			2,800
Balance, end of year		$62,900			$277,300			$39,000

Although each of the amounts in the above table is correct, in determining the balance at the end of the year, the accountant may have included amounts that should not be included and may have added rather than subtracted (or vice versa) amounts.

Prepare a revised table and calculate the correct year-end balances in the three investment accounts. (If an amount reduces the account balance then enter with negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

		Held for Trading Investments		Investments in Associates		Long-term Investments (at cost)
Balance, beginning of year		$		$		$
Unrealized loss
Dividends earned and received
Share of income
Carrying amount of investments sold
Balance, end of year		$		$		$

  

  

Prepare a table showing the amounts that would be reported on the income statement. (If an amount reduces the account balance then enter with negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

		Held for Trading Investments		Investments in Associates		Long-term Investments (at cost)
Income from associates		$		$		$
Interest revenue
Dividend revenue
Realized gain on held for trading investments
Realized loss on long-term investments
Unrealized loss on held for trading investments
		$		$		$

Answer 1

ANSWER:

(a)    

	Held for Trading Investments	Investments in Associates	Long-Term Investments (at cost)
Balance, beginning of year	$54,100	$256,200	$28,500
Unrealized loss	(3,300)
dividends earned and received		(7,700)
Share of income		21,400
carrying amount of investments sold	(4,800)*	_______	(9,200)**
balance, end of year	$46,000	$269,900	$19,300

proceeds $9,100 - gain $4,300)

** (Proceeds $7,000 + loss $2,200)

(b) Income statement
	Held for Trading Investments	Investments in Associates	Long-Term Investments (at cost)
Income from associates		$21,400
Interest revenue	$1,400
Dividend revenue	900		$1,200
R realized gain on held for trading investments	4,300
Realized loss on long-term investments			(2,200)
Unrealized loss on held for trading investments	(3,300)	_______	_______
	$3,300	$21,400	$(1,000)